The month of May in the United States saw two separate severe weather events which will each result in losses to the insurance industry of over a billion dollars, according to the latest monthly Global Catastrophe Recap report from Impact Forecasting, the cat modelling division of reinsurance broker Aon Benfield.
May saw the severe thunderstorm and tornado season spring to life with a vengeance, having seen activity levels below average up to that point. There were a number of severe weather events in the mid-west with tornadoes, strong damaging winds, large hail and some flooding the main perils resulting in losses.
The two main severe thunderstorm weather events which have caused the bulk of losses in May are the period of 18th to 22nd May, which includes the Moore, Oklahoma tornado event. That period is expected to have resulted in an economic loss of over $5 billion and an insured loss of over $2.5 billion, according to the report from Impact Forecasting.
The second period of severe weather is from 26th May to 2nd June, according to the report, and is expected to produce an economic loss of over $2 billion and an insured loss of over $1 billion, this includes $400m of insured losses from a single large hail event in Amarillo, Texas on the 28th.
Other events creating losses in the U.S. include severe thunderstorms between the 8th and 11th May causing insured losses of over $125m while another spell between 15th and 17th May is expected to cause insured losses of over $250m. Other U.S. events in May in the report do not have insured loss estimates, but are likely to be smaller figures.
So in total the Impact Forecasting report suggests that the U.S. suffered over $4 billion worth of insured losses due to severe weather events in May, with over $3.5 billion from just two outbreaks of tornadoes and severe thunderstorms.
The key word here could well be ‘over’. Risk modelling firm EQECAT estimated an insured loss of $2 billion to $5 billion from the 18th to 22nd May tornado events. Risk modeller RMS put an estimate of $2 billion and $3.5 billion of insured losses from the Moore tornado alone. So the figures from Aon Benfield’s Impact Forecasting team are likely accurate as they suggest ‘over’ the $3.5 billion of insured losses from the two main tornado events.
Steve Jakubowski, President of Impact Forecasting, commented; “The month of May is historically the peak of tornado season in the U.S., and after a relatively benign start to the month, tornado activity became much more prevalent during the last two weeks. Images from the aftermath of the EF-5 tornado in Moore, Oklahoma show the destructive power of the peril and how devastating impacts can be when tornadoes of such magnitude track through densely populated areas. High insurance penetration will help to alleviate the pressure on those affected, and the recovery is already well underway.”
The report from Impact Forecasting mentions the ongoing Central European flood event but does not try to put a figure on the insured losses, saying only that it expects economic losses in the billions of dollars.
So the insured loss estimates continue to suggest that the tornado events in May will cause a meaningful insured loss in the mid-single digit billions of dollars range, largely driven by losses from the Moore, Oklahoma tornado. That may be sufficient to begin to hit some reinsurance layers but the majority of the losses are likely to be paid by primary insurers. There still remains a threat to some catastrophe bond subordination or aggregate layers (such as with Combine Re Ltd.), but the events will not be sufficient to cause any losses to investors.
You can access the full report from Impact Forecasting, which includes details of other catastrophe events around the world in May, in PDF format here.
Read our coverage on the Central European flooding:
Read our other coverage on the Moore tornado event (most recent first):
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